Illustration by Bob AulFive years ago, Dr. Kali P. Chaudhuri, a Bombay-raised surgeon and aspiring hospital-industry mogul, purchased dozens of Southern California medical clinics and set them up under a company with his own initials, KPC. It was a bold stroke, a little vain—and disastrous. Fourteen months later, with KPC hemorrhaging red ink, Chaudhuri closed the clinics, stranding 250,000 patients, some without doctors or medical records. Lawsuits followed, along with claims of unpaid bills, financial mismanagement and fraud. It was a “meltdown,” said Pulitzer Prize-winning investigative reporters Don Bartlett and James Steele in their 2004 book CriticalCondition. And throughout the debacle, they wrote, Chaudhuri “continued to put a positive spin on KPC, just as he had done from the beginning. Profitability was always just around the corner.”
“Chaudhuri came in like a white knight . . . and then went out leaving a domino effect of clinic closings and more than $200 million in debt,” charged Bill Barcelona, deputy director of the California Department of Managed Healthcare. “Whole medical groups ended up trashed like old used cars on the side of the road. It was total and complete chaos.”
Since then, Chaudhuri has been a pretty unpopular guy. When he returned last year to buy four OC hospitals, doctors groups criticized him, reporters hounded him, state officials attacked his credibility. But he got the hospitals. And now, safely beyond that high-profile deal, Chaudhuri is finally retaliating—and he's starting with the littlest guy he can find. On June 23, his new holding company, Costa Mesa-based Integrated Healthcare Holdings, Inc. (IHHI), sued Dr. Michael Fitzgibbons . . . for an email.
In fairness, Fitzgibbons ain't a nobody. He's the former chief of staff at Western Medical Center, and arguably Chaudhuri's most articulate and courageous adversary. It was Fitzgibbons who prompted state legislators to examine Chaudhuri's role in the 2004 takeover of Western Medical Center Anaheim, Chapman Medical Center Orange, and Western Medical and Coastal Communities Hospital in Santa Ana.
“An awful lot of us know about Chaudhuri,” Fitzgibbons told the Weeklyback then. “Half the doctors in this county have either suffered financially or have patients who have been affected by the pain he's caused. And now he's back.”
But when the hearings were convened by state Senator Joe Dunn (D-Garden Grove), Fitzgibbons declined to testify. His attorney told Dunn's panel that Chaudhuri warned “other physicians” they had better side with his investment group, and said “it was 'probable'” that Fitzgibbons would be sued.
It's noteworthy that Dunn approved the deal after Chaudhuri's investment group promised Chaudhuri would have nothing to do with financial management of the hospitals—and after Dunn himself noted “very eerie comparisons” between Chaudhuri's business strategy and those of companies that buy troubled hospitals, “strip the assets and roll the skeleton over into bankruptcy court.”
None of those comments led to a defamation suit. What did was Fitzgibbons' May 19 email highlighting financial difficulties at an IHHI hospital.
Among other things, IHHI's suit complains that Fitzgibbons sent Blue Cross/Wellpoint a May 19 email “falsely” claiming that patient admissions to Western Medical Center “were down 20 percent” and that the financial situation there was “ominous.” At the time, IHHI was negotiating a contract extension and rate increase with Blue Cross/Wellpoint.
Fitzgibbons now acknowledges to the Weeklythat he wrote the email but said it was sent out without his permission.
“I did not mail it to Blue Cross,” he said. “I have no interest in seeing that the hospital does poorly. Obviously, that is where I make my living. Everything I said in the email was opinion that I believed to be true. There was no malice involved.”
Lawyers for IHHI did not respond to an interview request.
Tom Curtis, an attorney for Fitzgibbons and other doctors who have spoken out about Chaudhuri, said IHHI's complaint fails to meet the legal standard of defamation and provides no evidence of any economic harm to IHHI as a result of the email. He has filed a motion to dismiss.
“We also filed a request for judicial notice of the articles in your paper and other national papers so the court understands this is a matter of public concern,” Curtis said.
One of those Weeklyarticles (John Underwood's “Now With Less Chaudhuri,” Jan. 28) quotes doctors saying Chaudhuri has a reputation for “thriving on litigation.”
Curtis said his client is simply trying to make sure IHHI abides by its promise to keep Chaudhuri away from financial decision-making involving hospitals.
“The medical staff has tried to get IHHI to perform their obligations under this agreement,” Curtis said. “They view this lawsuit as retaliation against Fitzgibbons for expressing his legitimate concerns about quality of care and matters of public concern—and as an attack on the medical staff itself.”
Award-winning investigative journalist Nick Schou is Editor of OC Weekly. He is the author of Kill the Messenger: How the CIA’s Crack Cocaine Controversy Destroyed Journalist Gary Webb (Nation Books 2006), which provided the basis for the 2014 Focus Features release starring Jeremy Renner and the L.A. Times-bestseller Orange Sunshine: The Brotherhood of Eternal Love’s Quest to bring Peace, Love and Acid to the World, (Thomas Dunne 2009). He is also the author of The Weed Runners (2013) and Spooked: How the CIA Manipulates the Media and Hoodwinks Hollywood (2016).